Infra status to boost low cost housing – Budget 2017

Builders will be eligible for tax and subsidy incentives, and institutional funding at affordable rates.

Union Finance Minister Arun Jaitley, in the Budget 2017-18, has proposed to grant ‘affordable housing’ the coveted infrastructure status to facilitate higher investment in the sector and, in turn, achieve the government’s ambitious goal of ‘Housing for All’.

The grant of infrastructure status would mean builders will be eligible for many government tax and subsidy incentives, and institutional funding at affordable rates for low cost homes.

The move has evoked mixed response from the sector. Tushad Dubash, Director, Duville Estates, said, “With the infrastructure status, the sector can look at funding through insurance companies, which is a huge alternate sector and opens up a new avenue for real estate funding.”

Issue of land cost

However, Rohit Gera, Managing Director, Gera Developments & Vice President, Confederation of Real Estate Developers’ Associations of India (Pune) said, “The infrastructure status will truly see a big impact only if these lower cost funds are actually made available for acquisition of land. Without this, a large part of the funds required for the affordable segment for the construction will be provided by the end consumer. Large scale capital is not required once the land acquisition is completed and approvals are in place.”

Pointing out that in his Budget proposals last year, he had announced a scheme for profit-linked income tax exemption for promoters of affordable housing scheme and that it had received a good response, Mr Jaitley said he intended to make this scheme more attractive.

In a bid to boost affordable housing, the Budget 2017-18 proposed to ease the condition of period of completion of the projects from current three years after commencement to five years. Besides, measurement norm of affordable housing has been amended to carpet area from built-up area — a move that will expand the area and make more projects eligible.

The Budget also proposes to modify the affordable housing scheme by stating that “instead of built up area of 30 and 60 sq.mtr., the carpet area of 30 and 60 sq.mtr. will be counted. Also the 30 sq.mtr. limit will apply only in case of municipal limits of four metropolitan cities, while for the rest of the country including in the peripheral areas of metros, limit of 60 sq.mtr. will apply.

Refinancing loans

The National Housing Bank will refinance individual housing loans of about ₹20,000 crore in 2017-18, Mr Jaitley said. He added, “Thanks to the surplus liquidity created by demonetisation, banks have already started reducing their lending rates, including those for housing. In addition, interest subvention for housing loans has also been announced by the Prime Minister.”

There are also tax sops for developers struggling with completed but unsold homes, estimated at around six lakh units in eight major cities. “At present, the houses which are unoccupied after getting completion certificates are subjected to tax on notional rental income. For builders for whom constructed buildings are stock-in-trade, I propose to apply this rule only after one year of the end of the year in which completion certificate is received so that they get some breathing time for liquidating their inventory,” Mr Jaitley said. He also proposed to make several changes in the capital gain taxation provisions in respect of land and building. “The holding period for considering gain from immovable property to be long term is three years now. This is proposed to be reduced to two years,” the Finance Minister said.

“Also, the base year for indexation is proposed to be shifted from April 1, 1981 to April 1, 2001 for all classes of assets including immovable property. This move will significantly reduce the capital gain tax liability while encouraging the mobility of assets,” he added.

The Hindu 

Top 10 expectations of real estate sector from Budget 2017

Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn delay delivery of homes.
Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn d… Read More
 Real estate industry has high expectation from the upcoming budget 2016-17. Stakeholders are demanding that central government gives relaxation in income tax rate, provide clarity on GST, raise House Rent Allowance (HRA) deduction and announce policies to standardize construction materials in order to uplift the real estate industry.

Take a look at some of the major expectations that stakeholders have from the upcoming Budget 2016-17:

Industry status
Directly or indirectly, the real estate sector contributes to over 15% of India’s GDP. It has been asking for industry status for quite some time now. In its absence, developers are forced to borrow at high interest rates and comply with a stringent evaluation process. Unavailability of funds at a reasonable rate of interest delays the construction process and increases the final cost of homes, negatively impacting the end consumer.

Giving industry status to the entire real estate sector, instead of granting infrastructure status only to the affordable housing segment, would help in pushing the housing demand in India.

Single window clearance
For the real estate sector to really grow and execute its projects on time, various government approvals should be given in a timely manner. Developers have for long been demanding single window clearance to remove bureaucratic delays, which in turn delay delivery of homes.

Clarity on beneficiaries under PMAY
The government recently announced that interest rates of 3% would be applicable on loans of up to Rs. 12 lakh and 4% on loans of up to Rs 9 lakh, under the Pradhan Mantri Awas Yojana (PMAY). Now, two new income categories can avail higher loans with interest subsidies. The Budget should give more clarity on the actual definition of beneficiaries who can avail of these benefits.

For example – would young urban professionals hoping to buy their own apartments but not belonging to either the EWS (Economically Weaker Section) or the LIG (Low Income Group) segments be allowed similar subventions? Also, affordable housing is largely available in the fringe areas of metros and tier-II, III cities. Would certain redevelopment projects within metros meeting the affordable housing definition be granted similar benefits?

Financial protection from project delays
The deduction on interest of self-occupied houses is capped at Rs 2 lakh. For under construction residential units, however, if the construction is completed after 3 years, then the deduction is just Rs 30,000. This 3-year period starts from the end of the year in which the loan was taken. Lately, there have been many delays in the completion of many housing projects beyond the 3-year period.

This has caused hardships to property buyers. To provide them some relief, the government may consider allowing interest deduction in such cases without the cap of Rs. 30,000, and from the year in which the possession was due to the buyer as per the terms of the agreement.

I-T sops for first-time home buyers
Can a first-time home buyer looking at an affordable project get additional income tax incentives for at least five years? The Budget should throw more light on this. Any efforts in this direction would help the government move closer to its objective of delivering ‘Housing for All by 2022’.

Also, given the lack of institutionalized rental housing in Indian cities, such a move could spur many fence-sitters into moving out from their rented apartments to owned homes. It could also encourage more developers to come up with products suiting these segments.

Simplified tax norms for REITs
We have not seen a single REIT listing till date because of the presence of multiple taxes. Until tax hurdles are removed for developers and asset holders, it is highly unlikely that we will see any REIT listing. The government should recognize the capacity of REITs to improve market conditions for the real estate sector and remove the policies constraining their growth. The government should look at:

Reduced level of taxation of REIT income
Waiver of capital gains for the developer at the time of transfer of property into REIT
Removal of service tax on lease premises

Higher tax saving on home loan & home insurance premiums
The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant, given the ticket sizes in cities like Mumbai where most houses are priced at Rs 1 crore and above. Also, tax concessions on house insurance premiums could be introduced to encourage end-users to insure their homes.

Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year.

Clarity on GST

While the goods and services tax (GST) tax structure has been announced, the real estate industry is waiting with bated breath to see which tax rate is applied to the real estate and construction industry. Clarification would also be needed on the abatement scheme, and whether credit for input tax would be allowed if the composition scheme has been availed by developers.

Raise house rent deduction limit

Salaried persons get house rent allowance (HRA) as a component of their total salary, and can therefore claim a deduction. This deduction can be substantial in cases where the salary and its HRA component are higher. However, self-employed persons and those who draw lump sum pays without an HRA component can only claim a maximum deduction of Rs 2,000 a month under Section 80GG. The Budget can and should address this anomaly.

Digitize all land records

Digitize all land records and registration process to make them easy to do and transparent.

TimesofIndia

Home decor is not just plain old furniture and drab old wall.

 

Home decor is not just plain old furniture and drab old wall. There is so much that can be done, if only there is a change in perspective.

Customization is no longer the prerogative of a select few. It has become the mantra young adults live by. And this seems to have permeated into every aspect of life. Customisation dictates their taste in everything from what they wear to where they go, even where they live and the interiors of that space.

Adding a quirky touch to things makes it easy to bring out one’s personal style while allowing one to experiment with a variety of materials and styles; be it with wall hangings, cushions or even rugs. It breaks the monotony from the usual and plain patterns, adds spice, fun and life to the entire space. “A lot of clients come looking for interesting items with a twist to add a fun element to their homes. Quirky has almost become a fashion statement today and for most curios and décor items, the hype seems to be more around how high the quirk factor is, rather than understand the concept of the piece,” says Darsha, owner, Glamorama Furnishing Studio, a Chennai based design firm that specializes in customised designer soft furnishing solutions.

What makes this concept even more exciting and easy to adapt is the fact that, when it comes to quirky designs, there is no formula or guideline that needs to be followed, nor does it have a set module like classic design concepts. Being almost a reflection of one’s personal self, quirky interiors can call for all sorts of experimentations.

“We recently did an entire space with a fascinating colour scheme of emerald and mustard with a bit of fuchsia and some interesting decor pieces with Ikat and Bandhni prints. As unorthodox as it may sound, the space looked extremely vibrant with an unexpected twist”, she adds.

With this trend becoming popular by the day, a lot of designers have emerged in this segment to cater to the needs of the masses. While designers incorporate their personal style into their work, they also take inspiration from everyday things that the customers can also relate to.

“I’m inspired by India and her quirks, our culture, and simple elements that could go unnoticed. I also love to mix and match things and bring starkly different elements together seamlessly. From a cup of chai to street typography to nouveau art can be my muse”, says designer Nida Mahmood, who is often called the queen of Indian kitsch.

“There are a few trends to look out for at the moment a quirky printed wall covering can go well with simple under stated furniture. And if one loves to mix and match then mix different prints together. It’s fun to work with geometrics mixed with florals, like using a chevron bold wall paper that can be offset with beautiful botanical printed chairs”, she adds.

Another unique object that can be added to a room is a pouf a movable cushion that can act as a stool or a single seater. This piece could act as an accent piece in any room or can also be converted to a fun element, by covering them in bright colors, patch work upholstery or in different kinds of prints.

The trick with quirks is to fill the room with something simple and changeable, with pieces that can be easily moved around to work together as well as separates. It gives you multiple elements to play around with and gives the space a new and fresh look every day. All it takes is a new perspective and the right combination.

Veena Balakrishnan, Times Property, The Times of India, Chennai

Chennai among India’s top 5 hotspots for residential property investment

These cities have shown consistent performance year after year and attracting new business and industry.

The top five hotspots for residential property investment in the country today are Mumbai, Bengaluru, Hyderabad, Ahmedabad and Chennai. These cities are more or less regulars on most hotspots lists, but there is a sound rationale behind their consistent performance year after year. Not only are these cities attracting new businesses and industry, their respective governments are also investing resources in building adequate infrastructure to attract capital.

With their local economies growing, the influx of talent and skilled workforce into these cities is inevitable, and this naturally results in increased demand for residential properties. Also, the earlier slowdown in the economy and glut in the real estate sector has ensured that prices in these cities have come down, and developers active there have now invested in launching affordable housing projects that are in high demand. With the economy now on the growth path, more people will have money to invest in real estate which still remains the investment preferred asset class for most Indians.

These cities boast not only of availability of basic infrastructure in terms of electricity, water and other amenities, but are also improving in terms of communication and commuting facilities such as metros and road development. They also offer a better quality of life because they have a good saturation of leisure and entertainment facilities. This factor boosts the potential for outright sales and increased rentals.

While Hyderabad, Bengaluru and Chennai are the IT hotspots, Mumbai is seeing Navi Mumbai’s advancement as a growth corridor due to the increasing saturation of the mainland. These cities are seeing a constant growth in employment opportunities, attracting people from all over the country. This has naturally led to a lot of new residential projects being launched, especially in the high-demand affordable segment. As a result, NRIs looking for lucrative returns in new developments in these cities can expect handsome growth in capital values over the mid-to-long term, and steady rental income in the meantime. Also, the regulatory environment turning pro-consumer on the back of RERA imminent deployment, investing in residential property is all set to become even more attractive for NRIs.

Other cities as strong contenders

Since the time the government announced the list of Smart Cities in 2016, quite a few other cities have also moved front and center on the investment charts. They are particularly on the radar of NRIs focused on residential property investment. These cities include Pune, Kochi, Vishakhapatnam and Indore. The IT/ITeS sector strong and growing in these cities, and they have the added attraction of being commercial hubs and educational hotspot of their respective regions. These cities will show a lot of potential for lucrative property investments in the future.

2017 a year of change

By April, 2017, the entire country will be covered by the revolutionary Real Estate Regulation and Development Act, which has been designed for absolute consumer-friendliness. This Act will infuse a massive dose of transparency and efficiency into the entire Indian real estate sector. NRIs looking to invest into residential property in 2017 should focus on States where RERA is already active. If they have other cities in mind, they will not have to beyond May 2017, after which the real estate sector will be uniformly level playing field for everyone.

The recent currency demonetisation exercise may keep a certain segment of buyers and investors away from the market for a while, but for those planning to invest in projects developed by reputed builders and using formal and legal channels of financing, this is the right time to invest. Also, a lot of developers will be looking to achieve better liquidity for their future projects, making the first 1-2 months of 2017 an ideal period for buyers to negotiate favourable terms. It should be kept in mind that the expected nation-wide implementation of RERA by mid-2017 will bring with it a lot of compliance-related cost escalations for developers, forcing them to raise prices even if they do not wish to.

Ashwinder Raj Singh – CEO Residential Services, JLL India

Source: Times Property, The Times of India, Chennai

A vintage elegance

 

 

The Victorian theme lends a grand look to the interiors of your home. For a sophisticated and classic look, opt for the Victorian theme for your home decor. This theme can be infused in several doses to impart opulence in layers in the various areas of the home.

The Victorian look can, at times, appear heavy because of a profusion of trimmings and fuss, but a contemporary twist can also make it suitable for modern living.

Design elements

You can begin with designing a stunning Victorian living room with arched windows and doorways, and double height French windows with heavy teak wood panelling. Keep the walls uncluttered. Instead of having a number of paintings, opt for a single one along with an antique wall clock, accentuating the look of the polished wood.

Tonal quality

Use rich, jewel-toned colours to accessorise, such as strong blues, deep reds and rich greens. Opt for floral prints for your wallpaper and for sofa upholstery.

Furniture flair

In the Victorian theme, furniture should be of mahogany or teak, with ornate carving and tables with marble tops. Use round or oval backs for your chairs.

Fabric factor

Even standard decorations are done in excess here, be it the fabrics reflecting elaborate patterns, walls covered with intricate and vibrant textures, large flowers in dark colours, or curtains the décor exudes extravagance that typified the era rich, heavy, and opulent.

Accent aura

Some of the characteristic features of this style are marble faux fireplaces, large chandeliers, heavy mirrors, stained glass and chinaware. These can be easily adapted to feature in a modern home.

Picture frames

Victorian picture frames are a great way to make the walls of your room look elegant. They can magically transform any corner. Victorian pictures frames are mostly of brass with varying finishes. Antique finish, copper finish and silver finish are some of the popular finishes for a frame.

Lampshades

Lampshades are elaborate, with brass and etched glass fittings. Glass featured elsewhere too in the form of decorative stained glass used as panels on front doors as well as for windows. Collections of antique dolls impart are very Victorian.

Chandeliers

Light up with Tiffany-style lamps, wrought iron or brass chandeliers and even heavy candelabra.

Living room

The living areas can have large vases with floral arrangements and plant stands with potted palms. Grecian busts and statues also go well with this theme.

Bedroom

For your bedroom, furnish it with huge pieces of furniture and beds with elaborate canopies or huge head and footboards. Opting for chests and almirahs that are large and ornately carved will complete the look.

Source: Times Property, The Times of India, Chennai

Demonetisation slows down Chennai real estate sales

This fourth quarter saw a slowdown in real estate sales in Chennai with a 55% drop in housing units sold year-over-year.
This fourth quarter saw a slowdown in real estate sales in Chennai with a 55% drop in housing units sold year-over-year.
CHENNAI: The fourth quarter of the calendar year is usually the most hectic time when it comes to real estate sales in Chennai. With the festive season, fat Diwali bonuses, the auspicious day of Dhanteras, real estate developers usually see a lot of prospective home buyers queuing up.

This fourth quarter, however, saw a massive slowdown in real estate sales in Chennai with a 55% drop in housing units sold year-over-year.

In Q4 of 2016, only 757 units were sold compared to 1,673 units in the same period the previous year. Number of project launches in the city fell to 58 from 93 in the year ago period.

“Demonetisation has definitely impacted sales in Chennai. The cash crunch along with cyclone Vardah were a downer when it came to people taking decisions on property,” said Sridhar Srinivasan, managing director, Chennai, Cushman & Wakefield.

However, this is part of an overall trend in Chennai real estate market, which got exacerbated with the cash ban. For instance, the fourth quarter of 2013 saw a high of 2,554 units being sold. After which there has been a decline to 1,629 units in 2014 to 1,673 in 2015.

However, Cushman & Wakefield expects the phenomena to be temporary and won’t last beyond the new two quarters.

As to the “cash” or “black money” component of real estate sales, Srinivasan said this has not impacted mid-segment sales. “Middle-level housing units have seen a high impact. The high-end and luxury segment, which use a higher component of cheque vs cash, saw lesser impact. We are expecting this trend to continue for the next two-three quarter,” he said.

Mid-level housing units saw a 21% dip to 662 units in the fourth quarter of 2016, compared to 840 sold units in the comparable quarter last year. High-end units, however, saw sales nearly double to 91 in Q4, from 49 in the year-ago.
Another reason as to why transactions are being hit is because of stamp duty and registration fee that need to be paid at offices. Given the role of the “cash” component in property deed clearances, demonetisation has definitely thrown a wrench in the works.
For the full-year, the number of projects in 2016 dipped 24% to 57 from 75 last year. The number of housing units also dipped 21% to 6,419 from 8,174.

Home loan to become cheapest in 6 years as banks slash rates

  1. SBI home loans up to Rs 75 lakh, earlier available at 9.1%, can now be taken at 8.6%
  2. The reduction in MCLR will mean that new borrowers will get loans at the cheaper rates
  3. Old borrowers will have to enter into a fresh contract with the bank (by paying a small fee) to get loans linked to MCLR

MUMBAI: Home loan rates have fallen to their lowest level in six years with the State Bank of India, the country’s largest lender, cutting the effective rate to 8.6% from 9.10%.

While the SBI cut its one-year marginal cost of lending rate (MCLR) — the benchmark to which home loans are linked — to 8%, against 8.9% earlier, it kept the spread above MCLR at 60 basis points, against 20 basis points earlier.

So, home loans up to Rs 75 lakh, earlier available at 9.1%, can now be taken at 8.6%. For others, the rate would be 8.65%, against 9.15% earlier. Besides SBI, the Union Bank of India and the Punjab National Bank also cut rates.

Private sector banks like ICICI Bank are expected to follow suit.

TOI had carried a frontpage report on January 1, saying the SBI and other banks were set to cut rates following a prod from PM Modi to signal that benefits of demonetisation in the form of record deposits are being shared with the poor and middle class.

The reduction in lending rates by several public sector banks will make the affordable home loan scheme, announced by PM Modi on Sunday, available at a little over 4% for borrowers seeking loans of up to Rs 9 lakh. Details of the scheme are yet to be announced.

The reduction in MCLR will mean that new borrowers will get loans at the cheaper rates. Since home loans are linked to one-year MCLR, the rates are locked in for 12 months.

Older loans will get the benefit of the new rates only after their one-year lock-in ends.

Those who had availed loans before April 2016 would have their EMIs linked to the earlier benchmark, the base rate. These borrowers will have to enter into a fresh contract with the bank (by paying a small fee) to get loans linked to MCLR.

SBI has also reintroduced a teaser rate loan, where loans will be available at 8.5% for the first two years and at a floating rate in subsequent years. These loans were discontinued five years ago after the RBI frowned on them.

Other banks which have announced lower rates with effect from the New Year include State Bank of Travancore, IDBI Bank and Indian Overseas Bank. Top officials of the SBI said that home loans would provide the bank with an alternative to parking funds in government bonds where the return is less than 7%.

Meanwhile, banks expect the interest subvention on loans for affordable homes and home extensions and small enterprises to counter the slowdown caused by monetary contraction following demonetisation.

The impact of the schemes is expected to be felt in lending and on the overall economy in the first quarter of FY18.

“Today, 45% of bank loans is going to only 300 companies. The extreme concentration of bank credit on the top end of the corporate sector has begun to border on the ridiculous,” said Rajiv Lall, MD & CEO, IDFC Bank.

He added that the announcements by the Prime Minister would help rebalance this by encouraging loans to small business where the framework has already been created with the help of payment systems and bank accounts.

Lall also welcomed the fact that the government was encouraging small lending through market related programmes as compared to the past when priority sector lending was in the form of a diktat.

“From our perspective this is extremely positive and will help us further in penetrating into the segments we serve. With these announcements, the challenges that all faced following demonetisation would clearly be history,” said Kapil Wadhawan, chairman and MD, Dewan Housing Finance Corporation.

According to Gagan Banga, vice chairman and MD, Indiabullls Housing Finance, subsidised home loans will find many takers as the EMI cheque will now be smaller than the rent cheque. “This is a tremendously positive announcement coming on the back of many directed steps to realise the ‘Housing for All’ objective,” said Banga.

Dos and don’ts after cyclone Vardah

Uprooted trees at Nandanam in Chennai (TOI pic by R Ramesh Shankar)

CHENNAI: The revenue administration department of the Tamil Nadu government on Monday released a list of dos and don’ts for the general public after cyclone Vardah wreaked havoc in Chennai and surrounding districts.

In a release, the department recommended the following safety measures.

1. Till safety returns, do not go to areas where floodwaters have receded

2. Even after floodwaters have receded, avoid going to riverbanks

3. Check the safety of buildings that have been flooded; do not enter if there is stagnant water inside the building

4. Check if there are cracks or damages to the building, walls, doors, windows, ceiling to ascertain safety of the building

5. Check the electricity connections, gas stoves on the floor, boilers, LPG cylinders, motor pumps

6. If pipes are damaged, stop using toilets and water connections

7. If sewage pipes are damaged, get it fixed immediately to prevent spread of diseases

8. Along with flood water, insects, poisonous snakes could have entered homes – be careful

9. Avoid using water, food, medicines that were soaked. Clean and sterilise products before using them again.

10. If gadgets were damaged, disconnect from power supply

12. Drink boiled, chlorinated water

13. Use roads that are safe, be careful of fallen trees, electricity wires that have snapped or hanging low, land slides

14. Seek medical aid for small injuries, diseases

15. Register complaints with concerned officials about damaged water pipes, electricity connections

16. Take photographs of damaged buildings if you wish to claim insurance

17. If the gas connection is closed, be extra cautious while you light the stove again

18. Prevent children from playing in flooded areas

Residential real estate valuation will fall up to 30 per cent in next 6 months

Indian realty bracing for a sub-prime level crisis

Following the demonetisation move, experts predict the market value of residential property of Rs. 802,874 crore to be wiped off in the next 6-12 months. Nidhi Adlakha reports

According to a research by PropEquity, residential real estate valuation in the top 42 cities in India – sold and unsold – will fall up to 30 per cent. Indian realty is now bracing for a sub-prime level crisis, which is expected to deeply impact unorganised real estate and black money, says Samir Jasuja, CEO and Founder of PropEquity. “Out of five buyers, there is only one buyer willing to pay by cheque. And usually, people want to take at least 20 to 30 percent of the amount in cash, but this will now change for the time being. There will be a complete stop in resales in the coming weeks,” he adds.

But this will also mean that we can expect formal and organised developers to weather this storm and will relatively be in a better position in the next 9-12 months. “In our view, there will be acute pain in the short-term, but in the mid to long run it will be beneficial as it will create lot of transparency”.

So what is the long-term impact of this move on the industry? While such a sudden drop in prices within a short period is rare, the sector will bounce back as almost 80 per cent of buyers are salaried individuals who opt for home loans, says A. Shankar, National Director, JLL. He says construction activities will slow down as a majority of site deals are cash-based, and this would increase completion time for projects. New launches will see a lull period too, but the existing unsold inventory in the market will patch up in this period.

Developers, however, have another opinion. According to Dr. R. Kumar, the statement does not mean anything to the organised realty sector. He says the industry comprises different segments, and project sales in an organised market involve a small cash component, if any. “The demonetisation is the best thing that has happened to the industry. Over 10 lakh crore is getting into the banking system, and this will make substantial money available to banks for lending to businesses, construction, infrastructure development, and home buyer financing,” he says.

This move is not going to have direct impact on mid-market and affordable housing segments, says Murali, MD, Shriram Properties. “Such reports indicating a fall in land prices and real estate process are not accurate. Yes, there could be some impact on the land prices which may affect the luxury market, but this segment comprises less than 5 per cent of the overall demand in almost all cities.” A surplus availability of funds will also result in a substantial drop of interest rates too. “Getting rid of black money from the system will substantially reduce red tape, approval delays, and other costs,” adds Kumar.

Even during the global financial crisis, the real estate market fell less than 10 per cent, and it recovered a double of that between 2010 and 2012, says Mehul Doshi, Director, Doshi Housing. Speaking of how the move affects Chennai, he says, “The city is predominantly an end-user market and I do not anticipate a dip in prices in the affordable and mid – market segment. Customers in these segments depend on bank funding and hence all transactions are through cheque payments.”

Although transactions in most Metros are transparent, the market will slowdown for a period of 2-3 months due to a liquidity crunch. “This setback is temporary and the market will be back to normal by the first quarter of 2017. Developers will not focus on reducing prices but introduce incentives to attract buyers. Residential rentals will see a short-term drop of 10 per cent, but will stabilise once demand grows,” explains Shankar.

Anticipating buyer behaviour in this period, Jasuja says most end-users will wait for the prices to come down and delay buying decisions in anticipation of a price crash. “While small retail investors will completely go out of the market enter after 6-12 months, those who have already invested in under-construction properties, will default on their payments to developers as they will fear that prices will fall below their purchase value,” he adds.

At the same time, developers are encouraging buyers to not postpone their decision, and are aggressively marketing projects. “Buyers must make use of this period and with a drop in interest rates, they must opt for variable interest rate loans and make their purchase before prices renew. Property prices are likely go up with the introduction of Goods and Services Tax (GST), and the Real Estate Regulatory Authority,” says Kumar.

Source : The Hindu 

Real estate rules notified: What it means to you?

 

So the rules for the Real Estate Regulatory Act were notified for the Union Territories on October 31st as per requirements. Is that a cause for celebration yet for Indian home buyers?

The answer is a resounding yes. The fact is that these rules will become the model on the basis of which the states can draft their own regulations and rules. Some leeway has been provided to the states to make changes according to their own special requirements. But model rules make state-level policy-making easier. Explains one expert involved in the entire process who did not want to be named, “Notifying RERA rules is a relatively simpler process where the executive can draft them and just needs to be signed off by the cabinet ministers.” This holds promise of most states meeting their RERA rules notification and creation of regulator deadline of April 2017.

The regulatory authorities are to become the recourse for the consumer with speedy justice in two months, passive display of information to allow consumers to make informed decisions and also to legislate against errant developers.

So how will RERA impact you as an end consumer? It is important to analyse the details of the notification that was released by the Ministry of Housing and Urban Poverty Alleviation.

1)      If you buy a project, you will be able to assess exactly how much liveable area you get. It is mandatory for developers to declare the carpet area which was earlier hidden in the format of super area. Carpet area is the actual liveable space within your house. Super area is what you are charged for carpet area plus external common areas such as lift lobbies and corridors.  As a result while absolute prices may not come down, for you as a buyer, purchasing liveable space will be cheaper.
Promoter shall also declare size of the apartment based on carpet area even if it was earlier sold on any other basis. 

2)      You also get to know how much covered and uncovered parking space there is in the development. This has been a major bone of contention with many buyers in different cities.
Promoter also has to declare information regarding the number of open and closed parking areas in the project.

3)      Another critical benefit of the RERA is that the money that you paid to buy a project will be used for that project only. The developer needs to deposit 75% of collections into a seprate account that will service the project.
The developer, within three months of applying for registration of a project with the Real Estate Regulatory Authority shall deposit in a separate bank account , 70% of the amount collected and unused for ensuring completion of ongoing projects. 

4)      As per the RERA, all projects that are ongoing and not handed over to consumers will be under the purview of the regulation. Developers have been asking for this to be restricted to projects launched in 2016, but that is against the spirit of the Act which is drafted to ease the misery of consumers who have been struggling with non-delivery of projects that have been paid for.
In respect of the ongoing projects that have not received completion certificate in specified time,  developers will have to make public the original sanctioned plans with specifications and changes made later, total amount collected from allottees, money used, original timeline for completion and the time period within which the developer undertakes to complete the project, duly certified by an Engineer/Architect/practicing Chartered Accountant.

Many inconsistencies and unfair trade practices will come to an end. This includes the fact that both developers and consumers have to pay the same rate of interest for delay in payments and deliveries. Developers will be required to refund or pay compensation to the allottees with an Interest Rate of SBI’s highest Marginal Cost of Lending Rate plus 2%. 

Further to an assurance given by the Minister of Housing & Urban Poverty Alleviation to the Parliament during passage of the Real Estate Act, Rules stipulate such payment to the allottee be made within 45 days of it becoming due. This interest applies to payments due to the developers by the allottee which is to be paid within the period to be specified in the Agreement of Sale.

5)      One of the biggest problems that many consumers faced was the fact that there were changes in the plans after selling started so that they had no idea how the project would pan out on completion. This has been specifically addressed by mandating developers to put up earlier and changed approvals in the public domain for scrutiny.
 In respect of the ongoing projects that have not received completion certificate in specified time, developers will have to make public the original sanctioned plans with specifications and changes made later, total amount collected from allottees, money used, original timeline for completion and the time period within which the developer undertakes to complete the project, duly certified by an Engineer/Architect/practicing Chartered Accountant. Promoter shall also declare size of the apartment based on carpet area even if it was earlier sold on any other basis.

6)      Have you bought into a project and found that many years later, there has been no development? That could be a thing of the past. The new law mandates quarterly information sharing about the progress of the project.
Promoter shall upload on the webpage of the project, within 15 days of expiry of each quarter information regarding number and type of apartments or plots, garages booked, status of the project with photographs floor-wise, status of construction of internal infrastructure and common areas with photos, status of approvals received and expected date of receipt, modifications in sanctioned plans and specifications approved by the competent authority.

7)      Even though registration of projects and units with authorities was mandatory, there have been many instances where this was not done due to high registration charges. Keeping this in mind, the government has reduced the registration charges for projects.
For registration of projects, the fee has been reduced to Rs.5 per sq.mt for up to 1,000 sq.mt area and Rs.10 per sq.mt beyond this limit subject to a maximum of Rs.5.00 lakh per project. For commercial and mixed development projects, it will be Rs.10 and Rs.15 per sq.mt subject to a maximum of Rs.7.00 lakh. For commercial projects, it will be Rs.20 and Rs.25 subject to a cap of Rs.10 lakh per project. For plotted development, it is Rs.5 per sq.mt with a ceiling of Rs.2.00 lakhs.  A cap has been placed on the total amount of registration fee based on the suggestion of real estate bodies. Fee for renewing registration of projects with the Regulatory Authorities would be half of the registration fees.

8)      Searching for real estate agents has been a challenge for buyers across the country. Normally one would look for a recommendation from someone who has used the services earlier. This may well be a thing of the past with registration of agents coming under the ambit of RERA.
For registration of Real Estate Agents, fee now prescribed is Rs.10,000 for individuals and Rs.50,000 for other entities as against Rs.25,000 and Rs.2,50,000 proposed in the Draft Rules. Similarly, fee for renewal of registration of projects and agents has also been reduced to Rs.5,000 and Rs.25,000 respectively.

9)      Once the regulatory authorities are in place, consumers can approach the authority which has to dispose of the case in 60 days. That will come as a great relief to buyers, many of whom have battled in court for years against powerful legal teams of developers to seek justice.
Under the Rules, Adjudicating Officers, Real Estate Authorities and Appellate Tribunals shall dispose of complaints within 60 days.

Keep watching this space for more 101 write-ups on the RERA as we do a deep dive into this critical legislation that will bring order and harmony into a critical sector that serves as an economic indicator in most developed economies.

 E Jayashree Kurup is the head of Content and Advisory team at Magicbricks